Rainbow Group (002419): Store upgrades have contributed significantly to improved performance. Profit growth in 2018 is in line with expectations
Investment Highlights: The company’s 2018 revenue growth3.
25%, net profit attributable to mother increased by 25.
92%, profit growth basically in line with expectations.
The company achieved revenue of 191 in 2018.
380,000 yuan, an annual increase of 3.
25%, of which the retail business grows by 3 per year.
79%; realized net profit attributable to mother 9.
40,000 yuan, an increase of 25 in ten years.
92% (we expected 26.
80%), as expected.
In Q4 2018, operating income was 53.
40,000 yuan, at least -5.
2%; achieve net profit attributable to mother 2.
03 trillion, a year ago.
The improvement in the initial profitability mainly comes from the operational improvement brought by the store adjustment, which is specifically reflected in the decrease in the number of alternative stores and the maturity of the new store.
In 18 years, the company provided a total of 6 new shopping malls, including 4 newly opened direct-operated stores, 1 management export, and 1 takeover project; 1 newly opened direct-operated department store, and 1 Ganzhou franchise store project.
In addition, the company’s microfinance business has issued more than 20 billion loans in total; Suzhou Xiangcheng Tianhong and Nanchang Jiuzhou Tianhong projects have been completed, and the income has been carried forward5.
The same-store growth rate of shopping malls accelerated, and store adjustments brought significant improvements.
18 years of comparable retail sales in the main retail business increased by 1.
55%, operating profit growth rate of 17.
From the perspective of different types of business, the revenue of comparable stores in shopping malls is two years.
55%, operating profit growth rate of 64.
41%; comparable department store revenue for two years.
03%, operating profit growth rate of 20.
22%; comparable store revenue growth 4
01%, convenience store-2.
The profit of comparable stores in the main business increased rapidly, and the drainage and conversion effect of the company’s shopping malls and department store stores was initially adjusted. The 18-year Rainbow Shopping Center has been positioned as an event venue for happy times and family life; the department store format has continued to optimize products and promoteTheme display and theme editor marketing.
The initial sales management expense ratio increased slightly, and the improvement in gross profit margin improved the company’s profitability.
The company’s gross profit margin for the year 2018 was 27.
25% (up by 1.
5pct), net interest rate 4.
73% (up 0.
85pct), selling expense 杭州桑拿网 ratio 18.
95%, management expense ratio 2.
In the fourth quarter alone, the gross profit margin was 27.
30%, net interest rate 4.
36%, sales + management expenses rate 21.
48% (increase by 2.
In 18 years, the company’s real estate business income and profit contribution increased. However, due to the steady improvement of the main retail business in the past five years, the gross profit margin continued to increase. Participation in focused operations brought continuous and steady improvement in the main business, consolidating the leading scale of department stores.
Digitization and intelligence have become the new label of Rainbow.
Since reaching a strategic partnership with Tencent in April, the company’s digital upgrades and intelligent applications have progressed rapidly.
As of the end of 2018, the number of digital members of Texhong reached 16.44 million, of which the number of Thonghong APP members reached 8.4 million, WeChat fans 6.45 million and WeChat Mini Program members 1.59 million.
First online GMV 17.
960,000 yuan, an annual increase of 32%.
The opening of the back-end system helped Tianhong quickly realize online and offline collaboration, further improving the shopping experience of consumers, especially member consumers.
We slightly lower our profit forecast and maintain our “Buy” rating.
The industry continued to adjust during the low-boom period. Through intelligentization and digital transformation, combined with the transformation of the customer experience of the physical format, the company improved store drainage and profitability, gradually improved gross profit margins and significantly improved net profit margins.
Combined with the current trend in the consumer sector, the profit forecast was slightly revised, and the company’s EPS in 19-21 is expected to be 0.
89 (Original value 0.
92) / 1.
03 (Original value 1.
12) / 1.
14 (plus) yuan, corresponding to PE is only 14/12/11 times, maintaining the “buy” level.